| MANAGEMENT DISCUSSION AND ANALYSIS |
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| With several important products going off patent, increasing tonnage on the back of approvals from international markets, specially for complex products where the competition is not as high, API remains an interesting business opportunity. Additionally, this back-end support for our business offers cost and time advantages. The market for single entantiomer APIs was about $8.2 bill in 2004, and drugs with combined annual sales of $ 160 billion will come off patent by 2015. With governments the world over promoting the use of low cost generics, it is estimated that these sales will move to generic markets, implying a good scope for API supply. Reacting to intense competition from API manufacturers in India and China, a large number of international companies are moving production to these nations- buying units or setting up production bases in order to take advantage of lower costs. With this shift likely to continue going ahead, it is expected that API markets will continue to show margin pressure. |
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| A part of the USFDA approved Panoli API plant |
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| We use some of this API internally, and sell most of it to large innovator or generic companies in the US and Europe. In addition to speciality API, in the recent past we have begun to add API for anticancers, peptides, steroids and hormones, all made in plants that meet international regulatory standards, and some of which hold international approvals. |
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| Recent acquisitions have strengthened our ability to compete in interesting new API markets. One such opportunity is the controlled substance market, through our subsidiary's Hungarian plant. Another opportunity is in third generation cephalosporins with our plant in Baroda, an acquired site which has been recently upgraded. |
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| As we continue to address opportunities in the regulated markets with complex products, we expect to continue being agood partner for companies that source API from us. |
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